December 19, 2005

A BIG DEAL – AND A BIG ACHIEVEMENT

This week the US Congress is completing a difficult week finalizing the Budget and other important legislation for 2006.

Last weekend, European Union (EU) Leaders, at their Summit under the chairmanship of Tony Blair in Brussels, faced what, on paper at least, looked like an even more difficult task – agreeing an EU financial perspectives (an indicative budget) for the 7 years from 2007 to 2013 inclusive. It was made all the more difficult by the fact that the 25 EU leaders had to make these decisions unanimously, whereas the US Congress can decide many things by majority (though it is not always that simple, as we know!).

The European Union spends 1% of EU’s GDP. By comparison, Member State Governments spend 40% of EU GDP. While the amount spent at EU level seems relatively small, the passions involved in any share-out between different nations certainly are not! And many EU governments face very tight budgetary situations at home, so any money that goes to, or comes from, Brussels can make a big difference.

The pre-Summit debate in the media in each EU country placed huge emphasis on comparing what each country supposedly contributed to the EU budget with what it supposedly got back from it. Much of this debate was bogus because money paid out in one country may benefit other countries just as much. It is said that 40% of the capital investment supported by EU funds in poorer “cohesion” countries eventually flows back to richer states, whose companies often get the construction contracts. Furthermore, the richer a country is, the more it benefits from the existence of a Single European Market in which it has a guaranteed right to buy and sell.

Amidst all grandstanding, it was really a triumph for Tony Blair and all the other EU leaders to have crafted unanimously a 7-year budget that balances the interests of everybody.

FORMER YUGOSLAV REPUBLIC OF MACEDONIA

The Summit also decided that the Former Yugoslav Republic of Macedonia (FYROM) is to be a candidate for full EU membership. This sends a good signal to other Balkan countries, like Bosnia and Serbia, that EU membership is possible, if they solve remaining problems within and between them.

IRAN

The EU leaders discussed the negotiations with Iran. They said: “While the EU will continue to work for a diplomatic solution, the window of opportunity will not remain open indefinitely.”

IMMIGRATION

The Summit addressed immigration. While referring to the need to tighten control on illegal immigration, it said that Europe needs to look after those who have already come to Europe. For example, it asked the European Commission to work on cheaper and easier ways for legal immigrants to send money home to their relatives. Immigrants in both Europe and the United States are being charged truly exorbitant sums for money transfers back home. This is grossly unfair and must be stopped.

THE FUTURE OF EUROPE

The Summit said that the new Austrian Presidency of the EU would start the discussion on what to do in the wake of the rejection of the draft EU Constitution in the Netherlands and in France. The task is not made easier by the fact that the reasons for the "No” votes in those two countries were actually quite different.

A subsequent poll showed that the top reason (32%) given by Dutch voters for voting “No” was that they did not have enough information about the contents of the Constitution. Only 5% of French “No” voters gave that explanation.

In France, the top reason (31%) for voting “No” was a fear of loss of employment. Twenty-six percent spoke of the poor economic situation. These reasons were less important in the Netherlands.

Nineteen percent of Dutch voters were worried about loss of national sovereignty, whereas only 5% of French “No” voters had that worry.

Only 2% of “No” voters in France, and only 5% of “No” voters in the Netherlands, said they voted that way because they did not want a Political Union in Europe. People are in favor of the European Union, but they want a Union that is seen to respond to their needs.

The Dutch Foreign Minister, Bernard Bot, gave an interesting speech on this subject at a seminar in The Hague last month. He posed a question that is often brought up by critics of the EU. He said:

“For instance; the EU has recently considered safety standards for window washers, and for the safety of see-saws for use in children’s playgrounds. Do we really need legislation on these issues, and if we do, do we really need it all over the European Union?”

It may sound odd, but perhaps the answer to his question is actually “Yes, we do, need such EU-wide standards.”

If we want to be sure to be able to make and sell window-washers and see-saws freely between EU countries, we need compatible safety standards for them in all countries.

We can achieve that either by setting a single EU safety standard, or, if we decide to allow 25 different safety standards in each of the 25 countries, we must agree that we will each accept one another’s safety standards without question. That is what is known as "mutual recognition."

But if mutual recognition is to work, there probably has to be overall EU-wide guidelines to prevent one country cutting costs to help its manufacturers by setting dangerously low safety standards. That would be unfair competition. The same need arises when it comes to selling services like insurance or banking from one EU country to another.

So many complex EU rules, that seem easy to ridicule, actually make a lot of sense and save money. They allow trade, technological advance through specialization and job creation through economic growth to take place throughout Europe.

WORLD TRADE

We are all pleased that the Hong Kong WTO Trade Talks reached a consensus outcome. The EU made a major contribution to this. Much more is needed to complete the round. Creativity and courage will be demanded of all participants.

HAPPY CHRISTMAS

I am going home to Ireland for a few days over Christmas, so this will be by last message of 2005. I wish you a very happy Christmas and everything good in 2006.